Should they stay or should they go? Reactivation and Termination of Low-Tier Customers: Effects on Satisfaction, Word-of-Mouth, and Purchases
AbstractMany companies face the problem of having a substantial number of low-tier customers ? clients at the bottom of the customer pyramid. For this segment, it is necessary to either reactivate or terminate the customer relationships to increase profitability. Managers seek to learn more about marketing actions targeted towards low-tier customers and their response towards these actions. Therefore, we conducted a large field experiment in which we implemented a ?last call? marketing action for a large sample of low-tier customers of a catalogue retailer (N = 12,000). The action aims at sales reactivation, but in case a customer should not react, the relationship will be terminated. We measure customer response in terms of satisfaction, (positive and negative) word-of-mouth, and purchase behavior. We find no harmful effects from relationship termination, such as dissatisfaction or negative word-of-mouth. The results indicate that the ?last call? marketing action reactivates a small fraction of the low-tier customers. These customers remain active in the months following the action period. We discuss managerial implications of our findings and future research on low-tier customer segments.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 10008.
Date of creation: 2010
Date of revision:
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Homburg, Christian & Hoyer, Wayne & Stock-Homburg, Ruth, 2007. "How to Get Lost Customers Back? Insights into Customer Relationship Revival Activities," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 35535, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
- David Godes & Dina Mayzlin, 2009. "Firm-Created Word-of-Mouth Communication: Evidence from a Field Test," Marketing Science, INFORMS, vol. 28(4), pages 721-739, 07-08.
- Haenlein, Michael & Kaplan, Andreas M., 2009. "Unprofitable customers and their management," Business Horizons, Elsevier, vol. 52(1), pages 89-97.
- M. Tolga Akçura & Kannan Srinivasan, 2005. "Research Note: Customer Intimacy and Cross-Selling Strategy," Management Science, INFORMS, vol. 51(6), pages 1007-1012, June.
- Richins, Marsha L. & Bloch, Peter H., 1991. "Post-purchase product satisfaction: Incorporating the effects of involvement and time," Journal of Business Research, Elsevier, vol. 23(2), pages 145-158, September.
- Glady, Nicolas & Baesens, Bart & Croux, Christophe, 2009. "Modeling churn using customer lifetime value," European Journal of Operational Research, Elsevier, vol. 197(1), pages 402-411, August.
- Franses,Philip Hans & Paap,Richard, 2001.
"Quantitative Models in Marketing Research,"
Cambridge University Press, number 9780521801669, October.
- David C. Schmittlein & Donald G. Morrison & Richard Colombo, 1987. "Counting Your Customers: Who-Are They and What Will They Do Next?," Management Science, INFORMS, vol. 33(1), pages 1-24, January.
- JS Armstrong & Terry Overton, 2005. "Estimating Nonresponse Bias in Mail Surveys," General Economics and Teaching 0502044, EconWPA.
- Peter E. Rossi & Robert E. McCulloch & Greg M. Allenby, 1996. "The Value of Purchase History Data in Target Marketing," Marketing Science, INFORMS, vol. 15(4), pages 321-340.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joke Bulthuis).
If references are entirely missing, you can add them using this form.